Question 1

Taking a company private means turning a profit-seeking corporation into a nonprofit corporation in order to avoid a hostile takeover.

Accepted Answer

A) True 
 B)False

Question 2

The S corporation form of business would be particularly attractive to fast-growing companies that want to attract thousands of new stockholders.

Accepted Answer

A) True 
 B)False

Question 3

One advantage of an S Corporation is that the profits are distributed to the owners and taxed as each owner's personal income, thus avoiding the problem of double taxation.

Accepted Answer

A) True 
 B)False

Question 4

A merger involving a commercial bakery and a grocery retailer would be an example of a ________ merger.

Accepted Answer

A)  vertical 
B)  horizontal 
C)  linear 
D)  conglomerate 
A)  vertical 
B)  horizontal 
C)  linear 
D)  conglomerate

Question 5

Rhonda is convinced she has the best idea for a new business. Unfortunately, her business would require a fairly high initial investment and Rhonda has poor credit and very little personal wealth. She would be unlikely to find success if she organized her business as a sole proprietorship.

Accepted Answer

A) True 
 B)False

Question 6

A horizontal merger refers to a merger between two companies that serve entirely different markets.

Accepted Answer

A) True 
 B)False

Question 7

Oliver wants to start his own business. He should consider a sole proprietorship if he

Accepted Answer

A)  expects rapid growth and wants to be able to raise a large sum of money. 
B)  wants to make it easy to attract qualified employees. 
C)  wants to be his own boss and can accept unlimited liability. 
D)  wants to minimize the financial risk he must accept as the owner of a business. 
A)  expects rapid growth and wants to be able to raise a large sum of money. 
B)  wants to make it easy to attract qualified employees. 
C)  wants to be his own boss and can accept unlimited liability. 
D)  wants to minimize the financial risk he must accept as the owner of a business.

Question 8

When entering into a new partnership, a good strategy is to

Accepted Answer

A)  avoid putting the agreement in writing since this would limit the flexibility of the partnership. 
B)  put the partnership agreement in writing. 
C)  plan to incorporate as soon as possible. 
D)  agree to put the first year's profits back into the partnership. 
A)  avoid putting the agreement in writing since this would limit the flexibility of the partnership. 
B)  put the partnership agreement in writing. 
C)  plan to incorporate as soon as possible. 
D)  agree to put the first year's profits back into the partnership.

Question 9

Earnings of C corporations can be

Accepted Answer

A)  taxed twice if they are distributed as dividends to stockholders. 
B)  taxed at twice the going rate of a partnership or sole proprietorship. 
C)  taxed by the federal government, but they are exempt from state taxes if the corporation owns any facilities within that state. 
D)  taxed the same as a partnership. 
A)  taxed twice if they are distributed as dividends to stockholders. 
B)  taxed at twice the going rate of a partnership or sole proprietorship. 
C)  taxed by the federal government, but they are exempt from state taxes if the corporation owns any facilities within that state. 
D)  taxed the same as a partnership.

Question 10

Indira paid a substantial franchise fee to obtain a Precision Printers franchise in Columbus, Ohio. With the franchise fee behind her, Indira can use her creative talents to make her print shop different and more attractive than other Precision Printers stores in the Columbus area.

Accepted Answer

A) True 
 B)False

Question 11

A disadvantage of corporations is that an owner must get the approval of all other owners before selling his or her interest in the firm to another investor.

Accepted Answer

A) True 
 B)False

Question 12

Opening and operating a franchise in a different country

Accepted Answer

A)  is illegal according to the Clayton Antitrust Act. 
B)  is no different than setting up a franchise in the domestic market. 
C)  may require the owner to adapt to social and cultural differences. 
D)  is much less risky than owning a domestically based franchise. 
A)  is illegal according to the Clayton Antitrust Act. 
B)  is no different than setting up a franchise in the domestic market. 
C)  may require the owner to adapt to social and cultural differences. 
D)  is much less risky than owning a domestically based franchise.

Question 13

When two companies in completely unrelated industries agree to become one firm, the result is called a

Accepted Answer

A)  vertical merger. 
B)  joint venture. 
C)  conglomerate merger. 
D)  horizontal merger. 
A)  vertical merger. 
B)  joint venture. 
C)  conglomerate merger. 
D)  horizontal merger.

Question 14

Many franchisors have rules that prohibit franchisees from sponsoring their own websites.

Accepted Answer

A) True 
 B)False

Question 15

The most popular type of business for franchising is

Accepted Answer

A)  consumer wholesale firms. 
B)  restaurants. 
C)  specialty steel manufacturing. 
D)  medical services. 
A)  consumer wholesale firms. 
B)  restaurants. 
C)  specialty steel manufacturing. 
D)  medical services.

Question 16

Limited liability companies have both flexibility in tax treatment of earnings and limited liability protection for owners.

Accepted Answer

A) True 
 B)False

Question 17

Genna approached Al Ternator about joining the business as an owner. She offered to provide the technical expertise and deal directly with customers, while Al, who has a degree in finance, takes care of the financial side of running Car Keepers. In addition, Genna wants Al to contribute some much-needed money for expansion. Under Genna's proposal, she and Al would operate the business together as

Accepted Answer

A)  limited partners. 
B)  general partners. 
C)  majority shareholders. 
D)  business consultants. 
A)  limited partners. 
B)  general partners. 
C)  majority shareholders. 
D)  business consultants.

Question 18

After spending a summer "down under," two Oregon friends, Rick and Mick, created a general partnership to import emu from Australia to the U.S. After a year, Rick found himself at the mercy of Mick, who seemed to keep the books and seldom share the financial results, even though Rick was out selling the emu idea to farmers and ecologically conscious consumers and shipments were increasing. As their consultant, one of the first things that you inquire about is whether they are familiar with the UPA (Uniform Partnership Act), specifically the right to participate in managing the operations of the business.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following statements about farm cooperatives is most accurate?

Accepted Answer

A)  Farm cooperatives have declined in importance in recent years. 
B)  Farm cooperatives have become a major force in American agriculture. 
C)  Farm cooperatives have run afoul of U.S. antitrust laws in recent years. 
D)  Farm cooperatives have increased in number, but decreased in size in recent years. 
A)  Farm cooperatives have declined in importance in recent years. 
B)  Farm cooperatives have become a major force in American agriculture. 
C)  Farm cooperatives have run afoul of U.S. antitrust laws in recent years. 
D)  Farm cooperatives have increased in number, but decreased in size in recent years.

Question 20

Corporations represent 20 percent of all the businesses in the U.S. and earn over 80 percent of the total U.S. business receipts.

Accepted Answer

A) True 
 B)False

Exam 5: How to Form a Business

Taking a company private means turning a profit-seeking corporation into a nonprofit corporation in order to avoid a hostile takeover.

The S corporation form of business would be particularly attractive to fast-growing companies that want to attract thousands of new stockholders.

One advantage of an S Corporation is that the profits are distributed to the owners and taxed as each owner's personal income, thus avoiding the problem of double taxation.

A merger involving a commercial bakery and a grocery retailer would be an example of a ________ merger.

Rhonda is convinced she has the best idea for a new business. Unfortunately, her business would require a fairly high initial investment and Rhonda has poor credit and very little personal wealth. She would be unlikely to find success if she organized her business as a sole proprietorship.

A horizontal merger refers to a merger between two companies that serve entirely different markets.

Oliver wants to start his own business. He should consider a sole proprietorship if he

When entering into a new partnership, a good strategy is to

Earnings of C corporations can be

Indira paid a substantial franchise fee to obtain a Precision Printers franchise in Columbus, Ohio. With the franchise fee behind her, Indira can use her creative talents to make her print shop different and more attractive than other Precision Printers stores in the Columbus area.

A disadvantage of corporations is that an owner must get the approval of all other owners before selling his or her interest in the firm to another investor.

Opening and operating a franchise in a different country

When two companies in completely unrelated industries agree to become one firm, the result is called a

Many franchisors have rules that prohibit franchisees from sponsoring their own websites.

The most popular type of business for franchising is

Limited liability companies have both flexibility in tax treatment of earnings and limited liability protection for owners.

Which of the following statements about farm cooperatives is most accurate?

Corporations represent 20 percent of all the businesses in the U.S. and earn over 80 percent of the total U.S. business receipts.

Taking Risks and Making Profits Within the Dynamic Business Environment

Understanding Economics and How It Affects Business

Doing Business in Global Markets

Demanding Ethical and Socially Responsible Behavior

Entrepreneurship and Starting a Small Business

Management and Leadership

Structuring Organizations for Todays Challenges

Production and Operations Management

Motivating Employees

Human Resource Management: Finding and Keeping the Best Employees

Dealing With Employeemanagement Issues

Marketing: Helping Buyers Buy

Developing and Pricing Goods and Services

Distributing Products

Using Effective Promotions

Understanding Accounting and Financial Information

Financial Management

Using Securities Markets for Financing and Investing Opportunities

Money, Financial Institutions, and the Federal Reserve

Appendix: Working Within the Legal Environment

Appendix: Using Technology to Manage Information

Appendix: Managing Risk

Appendix: Managing Personal Finances

Filters